The 2020s Could Be the Decade When Electric Cars Take Over

Electric vehicles will become a more economical option than internal-combustion cars in most countries by sometime next decade, claims a new report by energy data analytics firm Bloomberg New Energy Finance (BNEF).

The reality, though, is that it’s highly uncertain if or when EVs will start gaining significant market share. That’s in part because it may not be so predictable how the costs of energy technologies will fall, and it’s hard to forecast what will happen to oil prices either.

The Organization of Petroleum Exporting Countries (OPEC), for its part, declared in December that without a technology breakthrough, EVs “are not expected to gain significant market share in the foreseeable future.” That would seem to be a safe bet; EVs currently make up less than 1 percent of the world’s car market.

The BNEF analysis is much more optimistic, to say the least, projecting that 35 percent of the world’s new cars will run on electrons by 2040. The bullish outlook is based largely on the speed at which costs for lithium-ion batteries are falling. Costs have dropped 65 percent since 2010, reaching $350 per kilowatt-hour last year. According to BNEF, that puts unsubsidized EVs on pace to be cost-competitive with comparable gas cars within six years. The group predicts that by 2030 the cost will be down to $120 per kilowatt-hour.

That’s more or less in line with an extensive analysis published last year by academic researchers, who found that battery costs are falling even faster than the most optimistic analysts predicted just a few years ago. Those researchers concluded that reaching $230 per kilowatt-hour is realistic by 2017, and that at $150 per kilowatt-hour we might see “a potential paradigm shift in vehicle technology.”

In 2015 sales of EVs grew some 60 percent. If that trend continues, and battery prices keep falling as quickly as they are, the 2020s could bring a shock  to the global oil industry.

(Read more: Bloomberg, BNEF, “Inexpensive Electric Cars May Arrive Sooner Than You Think”)